Automakers, suppliers firm up relationships in crisis

Relationships between suppliers and automakers haven't always been perfect. But if the COVID-19 crisis has exposed anything about those relationships, it's proven just how strong they are.

Even among suppliers, the COVID-19 pandemic has broken down barriers, transforming a competitive landscape into a collaborative one.

"It was incredible to watch our industry come together and talk about what it takes to restart," Shilpan Amin, General Motors Co.'s vice president of global purchasing and supply chain, said during a virtual presentation that was part of the Center for Automotive Research's annual Management Briefing Seminars. "You saw elements of removing the competitiveness and putting back in the collaboration across suppliers, across the industry."

And that willingness to work together for a greater, common good not only helped to keep the industry afloat, but it likely saved lives.

Amin pointed to GM's successful, swift transition to the manufacture and delivery of ventilators as proof. The project was, in large part, a direct result of the support from and collaboration among suppliers. The plan for building ventilators is complex and requires intricate parts, but auto suppliers stepped up by either making transitions of their own or using their connections to ensure others could make the parts needed.

"Collectively, as an industry," he said, "when the nation called for help, we all jumped on board to find solutions in providing for those critical care needs, whether it was ventilator production or ramping up capacity of personal protective equipment."

Within a matter of hours of GM disclosing ventilator project plans, Amin later added, "I had suppliers calling us, basically giving me access to their entire resources: all their people, all their capital, all their facilities: 'What can I do to help?'"

Katherine Worthen, vice president of direct purchasing for Yazaki North America, a supplier of wire and power components, wasn't surprised to see the industry come together like it did, not only to help meet the critical care needs of the nation, but to support each other through the difficult time.

During the online MBS session, Worthen and Amin were quick to note that the coronavirus crisis was nothing like the financial crisis of 2008. Nonetheless, there were lessons learned during the Great Recession that are continuing to help sustain the industry as it navigates the current pandemic.

"The automotive industry is very good at crisis management, quite honestly," Worthen said. "I think, over the last few years, we have really become collaborative with a lot of supplier communications. And with the [automakers], the communication and those touch points are just a lot more frequent."

That communication is a critical component to the management of the current crisis, which is nearly impossible to plan for. All it takes is one case of the coronavirus at any downstream supplier to force a major hiccup in the entire supply chain.

Most difficult of all? Predicting those hiccups are nearly impossible.

"That is what makes this so much more unique," Worthen said. "These things come up and you are reacting. That visibility of the supply chain, knowing what you have in inventory, what the risks are that we have from a supply standpoint — it is literally hour to hour.

"We are monitoring the hot spots, but in many cases, where we are seeing issues aren't even where those hot spots are. So you can put all this planning in place, thinking it's migrating around the globe, and then something [else] will pop up. ... It is very unique from anything we have seen before. And how do you react to that and what are your contingency plans?"

You react, she said, by taking a breath, stepping back and assessing your entire business model and supply chain from start to finish.

"When you look at how you need to optimize through all of this, we looked at our business structure and [asked] where do we need to find improvements?" Worthen said. "Where do we see risks in logistics and that end to end supply chain?"

In the past, when a crisis would hit the automotive supply chain, the response was always the same: Get boots on the ground, assess the situation and establish a timeline to resume production and find an alternative if needed.

That didn't work this time because the delays and the shutdowns were worldwide, not just locational. And the spread of the virus prevented in-person meetings and travel. That meant conducting a lot of business through virtual meetings.

Yazaki, a global supplier, already had built up a level of comfort with digital communication. So employees were comfortable with the technology. The key, Worthen said, was ensuring everyone was able to do their jobs from home. "We didn't skip a beat," she said.

That seamless transition, ultimately, helped Yazaki and others like it to navigate the crisis, ensuring a continuous flow of parts to automakers. Doing that means finding alternatives on the fly and carefully managing inventory.

"We have established one-on-ones and more frequent communication with our supply base to ensure that we maintain this collaborative approach to it," Worthen said. "Are there some tougher discussions? Yes. But they are more around alternatives. The OEMs have been great as it relates to supporting us on some of these crisis situations to where we need immediate reaction on alternative materials or alternative supply."

Now, more than six months into the pandemic, the auto industry is moving forward. Manufacturing may not look like it did at the start of 2020, but the new structure works. Everyday it may look a little different from the day before as carmakers and suppliers tweak their approaches.

But that, Amin said, is just part of the manufacturing process. It's just 21st-century business.

"If someone would have [told] our team back in March — really back in February — that we need to plan for something that will affect the global supply chain, suppliers' ability to produce and your ability to move material. That it will affect the entire world randomly, and you will have no control of when locations aren't able to produce and their ability to run. And oh, by the way, you are going to have to manage this for six months, it would [have been] easy to give up and say, 'That would be just beyond and impossible.'"

GM not only is managing it, but it's succeeding. And so are the auto suppliers it works with. None of it, though, would be possible without the strong relationships that have become the backbone of the business.